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Most CEOs Are Not Overpaid, Study Suggests

#Stephen Miller, CEBS

By Stephen Miller, CEBSJul 10, 2013

Page Content

Although most headlines on CEO pay focus on the total compensation packages of the figures who helm the largest public companies, a large majority of CEOs do not enjoy multimillion-dollar pay packages. U.S. CEOs earned, on average, $326,000 in cash compensation in 2012 (base salary and bonus) and total compensation of $360,000, including benefits, perks and equity gains, according to the new CEO and Senior Executive Compensation in Private Companies Reportby Chief Executive Group, a pay consultancy.

Of the roughly 30 million businesses in the U.S., fewer than 6,000 are publicly traded, and only the largest 8 percent of these public companies are included in the S&P 500. Despite this, "most people focus on the $14.1 million average annual pay package for the CEOs of the S&P 500 companies and mistakenly assume that this 0.002 percent of companies is representative of all CEOs," according to the report.

"To assume all CEOs have lavish compensation packages, based on the compensation packages enjoyed by the largest public companies, is like saying all actors and actresses are overpaid based on what Academy Award-winning actors command,” commented Chief Executive Group Chairman Wayne Cooper.

"Median compensation for private company CEOs was virtually flat with the prior year and did not keep up with the 2.1 percent inflation rate in 2012, let alone the 5 percent average increase enjoyed by the CEOs of the largest public companies," the study found.

The researchers noted that for a large majority of companies, CEO compensation is positively correlated with an organization’s size and complexity (in terms of revenue and number of employees) as well as its performance (revenue growth and profitability). The larger and more profitable a company is, the more its CEO is paid.